PRINT THIS PAGE Institutional Investor Profile: Arne Trondsen, Investment Director, Argentum12/09/2007. Source: AltAssets. 
Arne Trondsen on the rise of private equity in Norway, on the need for new fund managers in the country, on the benefits of local knowledge, on due diligence and on supporting other LPs.  Bergen-headquartered Argentum, founded in 2001, is a private equity fund of funds manager owned by the Norwegian Ministry of Trade and Industry. The firm invests across the Nordic region and currently has 24 private equity funds operating across a range of industry sectors in its portfolio. Argentum's team of ten works from offices in Bergen and Oslo. Out of the ten employees six are investment professionals.
Arne Trondsen is the investment director of Argentum. Trondsen's previous experience includes management consulting at McKinsey & Co. and the Boston Consulting Group.
What type of investments do you look for?
'We invest across the private equity fund universe. Most of our investments are in the venture and mid-cap segments. Looking at our portfolio allocation, it is a 60/40 ratio, buy-out to venture, with much of the buy-out investment being what would be called expansion capital, a buy-and-build platform investment.
Argentum invests across the Nordic region. Many other investors regard the Nordic region as one region, whereas we understand the different cultures and marketplaces, which gives us a competitive advantage.'
Do you look at first-time managers at all?
'Yes we do, and have done so with great success, particularly in the energy sector. We tend to take smaller stakes in first-time funds than we would take in other funds, but we actively support new managers. We have established an Emerging Managers Programme, a support programme for fund managers looking to enter or become operational in the Nordic markets.'
Is energy one of your main sectors?
'Yes. There are a number of interesting funds investing in the energy sector in Norway. As one of the key players in this region we benefit from our local knowledge and relationships we have developed with top performing managers in the Nordic region.
In Norway there are now two local GPs raising their third fund generation for the energy sector: one is Energy Ventures, a technology-focused firm; the other one is HitecVision, which has more of a buy-and-build strategy. In addition there is one emerging manager, ProCom Ventures, which is raising its first fund.'
How would you describe the Norwegian private equity market?
'Since 2001 we have seen quite a lot of activity in the Norwegian private equity market, but the marketplace could be more dynamic, meaning that there could be a larger number of managers investing in Norwegian companies.'
How do you find out about good investments?
'Most managers in the Nordic region know about Argentum and they talk to us when they are raising a new fund. We also proactively identify interesting managers in the Nordic countries.
Travelling is an important part of our deal-sourcing process. Our team meets as many new managers and managers we have not yet invested with as is feasible. We also speak to other LPs and GPs in our portfolio about new managers to hear their views.'
What do you look for in a good private equity manager?
'The experience of the team is very important, as are the skill sets of the team members and their individual and team track records. We analyse how they go about sourcing deals and adding value to their portfolio companies. Some of the very successful managers have just been extremely lucky, in our view, and luck can come and go.'
How do you conduct your due diligence?
'We do our due diligence as a team and discuss potential commitments in our weekly meetings. Our screening process comprises a number of criteria: does the fund fit into our strategy, are we happy with the terms and conditions, et cetera.
Once we have had a detailed look at the PPM and have talked to some of the fund's management team, we decide whether we want to take the fund to full due diligence.
The next phase is when we start applying significant resources to the process. We begin the fully fledged analysis of the track record, the strategy, the market conditions and the team stability. We meet with pretty much all the investment professionals in a team and also some of the CEOs of present and past portfolio companies.
If we work to a tight schedule, we can complete our due diligence within four weeks, although we prefer to have at least three months to complete the process. Managers now close their funds much faster and that means that we also have to be faster with our due diligence process to allow us to get access to the top managers.'
What are the most interesting sectors going forward?
'Historically, the private equity scene in Norway has been dominated by venture funds. Following the dotcom implosion and the lack of results in the venture area, things really started happening in the mid-cap buy-out segment, soon after Argentum started in 2002. If you look at the funds raised over the past three to four years, most of them have been in the mid-market segment.
Looking at industry sectors, energy is booming, as I said before, and especially oil and gas. It is one of those global industries for which Norway has developed a lot of the technology.'
What size of investments do you usually make?
'Our range is €10-50m and our average bite size is €15-25m. Currently we have €450m committed to 24 funds.'
Do you expect to receive additional capital from the government?
'We do not need additional capital because our returns provide us with new capital for investment. We actually get more money back than we can manage to put in the market.'
How do you see Argentum progressing over the next few years?
'I think for the next few years, we will continue along the same path, becoming a bigger Nordic player. We want to continue to cement the relationships with the managers we are invested in now, and obviously look to find new managers in the Nordic area, building a highly diversified portfolio. At this moment in time we do not see the necessity of diversifying internationally as we are already getting some exposure to international markets through some of our international managers operating in Norway.
We like to be seen as the Nordic specialist, and over time, we would increasingly like to become an advisor to international investors in the Nordic region. We might even consider selling part of our portfolio to investors new to the region or the asset class, as a kind of starting point for them. Of course, we would look to sell it at a premium and as part of a strategic move, to get capital to invest in areas we have not yet had exposure to through our existing relationships.'
Copyright © 2007 AltAssets
|
